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Monday, August 5, 2013

Colorado man pled guilty for mortgage fraud schemes

Roger K. Howard, 50, Englewood, Colorado, pled guilty recently before U.S. District Court Judge R. Brooke Jackson to three counts of wire fraud and one count of money laundering.
Howard, who is free on bond, is scheduled to be sentenced by Judge Jackson on August 26, 2013. Howard’s co-defendant, Oai Quang Luong, pled guilty to three counts of wire fraud on May 22, 2013, and is scheduled to be sentenced on August 15, 2013.
Howard and Luong were indicted by a federal grand jury in Denver on January 25, 2012. According to the facts contained in the indictment as well as the stipulated facts contained in the plea agreement, in 2006 and 2007, Howard devised and participated in three similar but separate mortgage fraud schemes.
The first and larger scheme involved the sales of 26 town homes in a development known as Oliveglen Villas, East Princeton Place, Aurora, Colorado. The second scheme involved the sale of a residence in Castle Rock, Colorado, and the third a house in Denver, Colorado.
During the relevant times, Howard operated under the business names of Spring Creek Mortgage Real Estate Services and Open Range Development LLC. Howard controlled bank accounts in the names of both companies. Also at the relevant time, Howard’s co-defendant, Oai Luong, worked for a company that processed mortgage loan applications on behalf of potential home buyers. Both Howard and Luong had offices in the same building in Centennial, Colorado.
By the middle of 2006, the developer of Oliveglen Villas had accumulated an inventory of unsold town homes. At that time, two real estate agents attempted to obtain the right to buy some of the town homes, but they were unsuccessful. The agents then were referred to Howard, who told them that he could arrange for individuals, whom he described as investors, to purchase the properties. In August 2006, Howard asked Luong to obtain the $250,000, and Luong did so using funds loaned by another individual. Howard persuaded 17 individuals, his so-called investors, to purchase the town homes.
Howard arranged for the individuals to obtain the mortgage loans, and, in doing so, he knowingly caused the applications for those mortgages to include false or misleading information or omit material information. Many of the applications overstated borrowers’ monthly incomes, often claiming incomes were more than double the actual amounts. Loan applications also contained false information about borrowers’ assets, usually bank account balances. As part of the mortgage application process, a borrower obtained from his or her bank a form known as a Request for Verification of Deposit (VOD), which verified the balance of an account.
In this case, VODs were misleading because Howard and others working at his direction arranged for bank account balances to be inflated temporarily; that is, money was deposited into the accounts and, after the balances were verified and the VODs were completed, the money was withdrawn. All the town home sales prices were supported by appraisals, most of which were done by an associate of Howard’s, which he told the appraiser the amount he wanted.
For each closing, the closing agent prepared a settlement statement reflecting that the disbursements of loan proceeds included a payment from Seller’s Funds at Settlement to Open Range Development. These payments were the service fees mentioned in the contract with the developer; they ranged from $85,700 to $117,204. After the closings, Howard used some of that money to make payments to all but one of the buyers, but those payments were not disclosed to the lenders or their underwriters.
Howard for a time wrote checks payable to the borrowers to cover the differences between rental incomes and mortgage payments, but he stopped doing so on April 19, 2007. A few borrowers thereafter used their own money to make mortgage payments, but eventually all the mortgages went into default and the lenders foreclosed. At that point, there were about 12 different lenders holding the mortgages on the town homes, and they lost approximately $7,609,729.31.
Wire fraud carries a penalty of not more than 20 years in federal prison and a fine of up to $250,000 per count. Money laundering carries a penalty of not more than 10 years in federal prison and a fine of up to $250,000 per count.
United States Attorney’s Office, IRS-Criminal Investigation, and the Federal Bureau of Investigation announced the guilty plea.
This case was investigated by agents with Internal Revenue Service Criminal Investigation (IRS-CI) and the Federal Bureau of Investigation (FBI).